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In a recent judgment passed by Gujarat High court in case of Engineering India Private Limited wherein the Hon’ble Gujarat High court held that Service provided by Indian subsidiary to it 100% holding company  abroad is export.

Summary :

Case law  : Linde Engineering India Private Limited Other vs. Union of India [R/Special Civil Application No. 12626 Of 2018] 


  • The Petitioner i.e. Linde Engineering India Pvt. Ltd., was involved in providing consulting engineering services to its parent Company i.e. Linde AG, Germany, situated in Germany without payment of Service Tax.
  • However, the Petitioner was served with a SCN, requiring him to discharge service tax liability on the basis of the argument provided by Department that the services provided by the petitioner does not qualify for export of services considering the fact that the Petitioner and its clients were mere establishments of the same legal entity. Aggrieved, the Petitioner filed a Writ before the Gujarat HC. 

Petitioner Contentions

  • The Petitioner submitted in the writ application that the action of the Respondents (“Revenue”) is beyond its jurisdiction, being contrary to Rule 6A of the Service Tax Rules, 1994 read with Section 65B(44) of the Finance Act 1994 
  • Further the action taken by Revenue is also against public interest since it would act as a deterrent to the trust given for export of services out of India by the Government, through its various scheme such as ‘Served from India Scheme’ and ‘Make in India’.
  • It was submitted that the Revenue is seeking to bring all services provided by any Indian Company, outside India to its holding Company or its other group Companies located outside India, within the ambit of service tax law, in an arbitrary manner, despite the fact that the same would qualify as an “export of service” which is not liable for levy of service tax.
  • It was further submitted by the Petitioner that the Revenue’s interpretation of law, by which, the holding company of the Petitioner is considered as its other establishment is contrary to the object and purpose of encouraging the export of services from India to locations outside India. Such interpretation made by the Revenue would be wholly arbitrary and contrary to the scheme and provisions of the Act and the Rules inasmuch as in terms of the definition of ‘exempted service’ provided in Rule 2(e) of the CENVAT Credit Rules, 2004 the provision of services by the Petitioner would qualify as an ‘Export of Service’, and therefore the provisions of Rule 6(3) of the CENVAT Credit Rules would have no applicability.

Revenue contention

  • The Respondent had submitted that the Writ Petition is not maintainable under Article 226 of Constitution of India stating that the same is issued against a Show Cause Notice which is yet to be adjudicated by the competent authority.
  • The Respondent further submitted that the issuance of Show Cause Notice does not give rise to a cause of action to the writ petitioners under Article 226 of the Constitution of India and it does not amount to an adverse order, which affects the right of any party unless the show cause  notice has been issued by a person having no jurisdiction to do so, which is not fact in the present case. 

Hon’ble Gujarat High court Ruling

  • The Gujarat HC observed that Show Cause Notices only expresses prima facie opinion and the Petitioner has failed to make out a case of non-application of mind by the competent authority to issue SCN and even if the SCN is issued on the basis of the points raised by the Audit Officer, it cannot be construed as intervention in the judicial function of the adjudicating authority.
  • The HC further observed that the Respondent assumed the jurisdiction on mere misinterpretation of Section 65B(44) of the Finance Act r/w. Rule 6A. By no stretch of imagination, can it be said that the rendering of services by the Petitioner to its parent Company located outside India was service rendered to its other establishment so as to deem it as a distinct person as per explanation 3(b) of Section 65B(44) of the Finance Act. The Petitioner, an establishment in India, a taxable territory and its 100% holding Company, which is the other company in non-taxable territory cannot be considered as establishments so as to treat as distinct persons for the purpose of rendering service.
  • It was further observed by the HC that Show Cause Notice had been issued without jurisdiction as the same was issued by invoking the extended period of limitation, which was not warranted. Consequently, the petition was ruled to be maintainable under Article 226 of the Constitution of India.
  • The Gujarat HC held that Services rendered by the Petitioner outside the territory of India to its parent Company would have to be considered “export of service” as per Rule 6A;
  • The Revenue had no jurisdiction to invoke the provisions of law to bring the services rendered by the Petitioner to its parent Company within the purview of levy of service tax under the provisions of the Finance Act;
  • The SCN is not tenable as the same was issued by invoking the extended period of limitation.

Authors Comments

As we are have witnessed that in recent GST AAR rulings, the authorities have stated that decision relating to ascertainment of place of supply is outside the purview of advance ruling.

Accordingly, this judgement would definitely place its impression on relaxing the bar on various allegation given by revenue on transaction ranging from rejection of refunds claim, nature of transactions etc. on ground that the subsidiary and holding companies are mere establishment of same person and supply of services between them would not be a zero-rated supply.

The judgement in this case would definitely have far reaching impact in GST. Since, in current time the issue between the Taxpayers and revenue is always is matter of dispute to consider the said transaction as export of services or not. Hence, settling the bar on a certain point, although not in entirety.


Disclaimer: The views expressed herein are the views of the author and cannot be used in framing of opinions or for the purpose of compliance without an independent evaluation.

Author can be reached at-: expertsgst87@gmail.com


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July 2024